Seattle and California are among the places trying to ensure higher pay for Uber and Lyft drivers. But the companies and some drivers have said that proposed regulatory changes might put many drivers out of work, force the services to shut down or make many rides unaffordable.
This fight reflects one of the important questions about Uber and Lyft: Can governments rein in some of the harm of these services without wiping out what many people like about them?
In one case, the answer appears to be yes.
New York City regulators two years ago made new rules that guaranteed a minimum wage for drivers of Uber, Lyft and similar services. Among the worries was that drivers and passengers could wind up worse off, because the rule changes would increase fares and drivers would lose work.
Some of those fears have come to pass on the margins, but the rules so far have largely accomplished what the city intended: Drivers in New York have made more per hour and for each trip on average, people haven’t been significantly discouraged from riding with Uber or Lyft, and even the companies have most likely done better.
That was the conclusion of Michael Reich, a labor economist at the University of California, Berkeley, whose work was instrumental in the New York regulatory changes and has analyzed data on about 500 million trips made in 2018 and 2019 that Uber, Lyft and other companies shared with the city.
“The lesson from New York is that, when regulators changed rules for the whole industry, drivers were paid more, companies earned more and passengers on the whole did fine,” Reich told me.
If Reich’s conclusions about New York apply elsewhere — and he said they most likely do, with caveats — it shows that governments can ensure higher wages for drivers without making everyone worse off.
There were downsides to New York’s changes. Uber and Lyft drivers earned more for the time they worked, but there were fewer open positions for newcomers and not all drivers could work whenever they wanted. This made some drivers unhappy.
Also, prices for some rides did go up. Reich said he expected a 5 to 10 percent increase in fares across the board, with a resulting 10 percent increase in driver pay. That’s about what has happened, he said. (Reich is crunching fresh data to assess the effect of the coronavirus pandemic.)
Uber has said that costs for rides increased mostly in lower-income neighborhoods. Keep in mind that higher fares are good for Uber and Lyft, because they generate more profits for the companies.
New York is unusual. Reich said fares could increase more in other places that were trying tactics to increase driver pay. But he doesn’t believe the worst-case scenarios that companies like Uber have sketched out.
One reason it’s hard to write rules for Uber and Lyft is that they know everything about what drivers make and passengers pay, but almost everyone else is in the dark. New York demanded data from the companies, and spoke extensively to drivers to find out what their wages and expenses were, said Meera Joshi, who was commissioner of the New York City Taxi and Limousine Commission when it made the rule changes.
“Without the ability to double check, then all the public and lawmakers are left with are unfounded statements about what happens when they pass this law,” Joshi told me. “I hope other cities see it as a model.”